BAC Russia

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26654
Company name	ZAO BAC (ZAO Bi-Ei-Ci)
Country	Russian Federation
Sector	Information
Environmental category	C
Department	Global Inform. & Comm. Tech.
Status	Pend PDS-IR

Date SPI disclosed	July 23, 2008
Projected board date	August 22, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project involves a $22 million investment in B.A.C (BAC or the company) for expansion of its operations to regional cities in Russia and potentially elsewhere in the Commonwealth of Independent States region, the establishment of a number of new data centers, and incremental working capital. Through the investment, the company will provide an increased array of IT services required by medium-sized and large clients, both in the private and public sectors.

Anticipated development impact of the project

Some of the development impacts are highlighted below:

Data Center Provision:
High quality hosting is a key element of IT infrastructure enabling the increased use of high technology among private corporations, individuals and government. Through economies of scale, specialty knowledge and extensive staff training, BAC will allow their clients to enjoy cost savings and high quality service provisioning that they would not otherwise obtain if these services were operated in-house.

Increase in Capacity:
The Russian IT sector is currently under-served by data center capacity. Further development is required to build capacity and encourage more sophisticated use of technology for both domestic corporations as well as small businesses.

SME development:
BAC’s regional expansion plans will provide the company with opportunities to work with SMEs in frontier Russian and CIS regions. For the SME sector, data centers allows for young businesses to have access to professional grade technology platforms and reliable, consistent Internet connectivity without the burden of significant upfront capital expenditure on equipment and the ongoing high costs of recruiting specialist IT staff.

Regional Expansion:
BAC plans to open new offices and acquire mid-size IT companies in frontier regions that have inadequate IT services capacity. The company’s move to these regions would support existing clients that are expanding business to those regions, in turn, increasing economic activity.

Employment and skills training:
Over the next four years, BAC plans would create several hundred new engineering jobs. Given the shortage of qualified engineers in Russia, most of the new hires are expected to be lower-skilled employees that would be trained. BAC’s training programs and coupled with tailored mentoring are expected to turn those low-skill entrants into high-skill employees with the appropriate level of expertise for the company’s offerings.

IFC's expected development contribution

IFC will play an important role in supporting a domestic, entrepreneur-led company in expanding its operations while enhancing its corporate governance. IFC will also encourage the company with Best Practice Environmental Policies. IT systems require significant power to operate. Hosting systems within dedicated data centers, as opposed to having corporations and governments host their own systems in-house, should reduce overall energy consumption due to both economies of scale and the use of specialized design. Data centers are more able to utilize new technologies designed to reduce environment impact such as combined heat and power (CHP) systems, power-managed servers and adaptive cooling. IFC would provide knowledge and work closely with BAC in the adoption of best practice environment policies with respect to data center design, equipment procurement, operations and staff training.

Environmental and social issues - Category C

At early review, it is expected that BAC facilities would be leased and custom-fit rather than purpose-built for BAC. During appraisal, environmental and social risks and impacts of any fuel tanks, cable connections, and security issues will be reviewed. As a result of this early review, the project has been provisionally classified as a Category C project according to IFC's Environmental and Social Review Procedure.

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